Harsco Corporation (NYSE:HSC) Q2 2017 Earnings Conference Call - Final Transcript

Aug 03, 2017 • 09:00 am ET


Harsco Corporation (NYSE:HSC) Q2 2017 Earnings Conference Call - Final Transcript


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Peter Minan

range of $80 million to $95 million.

There are a number of moving parts within our outlook, including variables and assumptions for each business unit. Our segment outlook details are included in the appendix to the presentation. But let me call out some highlights. First, we've raised our operating income guidance for the Metals & Minerals segment. This change reflects improved performance in North America and Europe, higher expectations for our applied products businesses, some new contracts and foreign exchange rate changes. We've also increased our outlook for the Industrial business as a result of the added demand for air-cooled heat exchangers, which we mentioned earlier. We now expect that Air-X-Changers revenues will grow nearly 40% in 2017.

And thirdly, these positive trends offset our modestly lowered expectations for the Rail segment to reflect a more cautious outlook on equipment spending and parts purchases in North America. As we discussed last quarter, Rail traffic trends in North America are positive and encouraging. However, spending habits among our key regional customers remain weak and there continues to be excess inventory of maintenance of way equipment within the supply chain. And as a result, we don't expect this market to begin recovering until 2018.

So now moving to Slide 9. Regarding our third quarter outlook, we now expect operating income to be between $30 million and $37 million as compared to an operating income of $29 million in the third quarter of 2016. Operating income in Metals is expected to increase slightly versus the 2016 quarter, mainly due to higher steel production and service levels, as well as additional contributions from nonnickel-related applied products.

Industrial operating income is forecasted to increase due to improved demand for heat exchangers and commercial boilers and water heaters, as well as a more favorable product mix. Meanwhile, Rail income is forecasted to decrease due to lower equipment sales and contract services contributions and a less favorable product sales mix overall. And corporate costs are anticipated to be slightly above prior year levels.

So that concludes our prepared remarks. And at this point, we'd be happy to take your questions.